OPINION
The 'New Normal' Benefits Trade Growth Transformation
As a major trading nation in the world, China now has to transform its trade growth model to be more competitive in world trade. Therefore, the country must no longer rely on labor-intensive products.
However, I acknowledge that shifting a trade growth model is by no means an easy task. In an extensive economy, domestic industries cannot fully support the transformation process of the foreign trade growth model.
Currently, the foreign trade sector must adapt to the new normal and contribute to the improvement of the industrial environment on which it relies, so as to seek a new growth momentum.
What is the new normal? It describes an observed set of trends in the Chinese economy, namely the change in its growth from a relatively high speed to a moderately high speed, the improvement in economic structure as well as an overall change from factor- and investment-driven to innovation-driven.
Although foreign trade isn't specified in this definition, the process of transforming the trade growth model is of course part of the new normal.
Firstly, China's changing economic growth grade will result in increasing liberalization in the field of foreign trade.
In the currently complicated international market, slower trade growth in China will facilitate the transformation of its foreign trade growth model. Rather than squandering time, slower trade growth also allows for preparation for the sector's upgrade.
Secondly, the Chinese economy's upgrade will improve the domestic economic environment, on which foreign trade relies.
Only when domestic industries become more competitive can Chinese products be competitive in the international market.
China's high-speed railways and Huawei products are better accepted by the international market because those industries have been more competitive. What China must do is to nurture more industries like high-speed railway and more companies like Huawei.
Thirdly--least surprisingly--as the Chinese economy changes from factor- and investment-driven to innovation-driven, China's foreign trade also requires innovation.
Although China has been a major manufacturing country in the world, its research and development capability still falls behind that of other manufacturing giants. Without research and development, an innovation-driven economy cannot reach its fullest potential, and China will only continue to play a supporting role in the international industrial chain.
Therefore, China must both strengthen research on all fronts and make secondary innovation based on advanced technologies introduced from developed countries.
Transforming China's trade growth model has been discussed within the country for years, and China has been pushing to increase the added value and technology content of export products.
Despite the progress already made, however, China's overall industrial structure has not shown improvement. Without a solid industrial foundation, the nation's options for upgrading foreign trade will remain inadequate.
In recent years, China has been trying to upgrade its foreign trade structure to force the improvement of its industrial structure.
The country has made some efforts in the realm of strategic emerging industry development and the establishment of hi-tech industrial parks, which have produced a handful of short-term effects. From a long-term perspective, however, this will not help improve the position of China's manufacturing industry in the international industrial chain.
As the Chinese economy is entering its new normal, its industrial environment, on which foreign trade relies, will hopefully show remarkable improvement, and China's foreign trade will get the chance to transform its growth model in accordance with the requirements of the new normal. This is the new momentum China's foreign trade must show.
This is an edited excerpt of an article by Bai Ming, a research fellow at the Chinese Academy of International Trade and Economic Cooperation, which was published in Economic Information Daily
NUMBERS
38.7%
Year-on-year drop in the land area used in real estate development in China
3 tln yuan
The total value of yuan-denominated bonds issued in China in the first quarter, up 39 percent year on year
17.9 bln cubic meters
Estimated coalbed gas output in China in 2015
2.71 tln yuan
China's tax revenue in the first quarter, up 3.4 percent year on year
25 mln units
Forecasted auto sales in China in 2015
5.04 gigawatts
Solar power generation capacity in China in the first quarter
835 mln yuan
Reduction of government budgets for overseas traveling, official vehicles and receptions this year
$78.3 bln
Increase in foreign exchange deposits in the first quarter, $39.4 billion more than that of the same period last year
